RESEARCH STRATEGY REPORT SME BUNDLING STRATEGIES … · 2020. 3. 30. · SME bundling strategies...

SME bundling strategies for operators: building an ICT portfolio for SMEs

© Analysys Mason Limited 2018

RESEARCH STRATEGY REPORT

analysysmason.com

SME BUNDLING STRATEGIES FOR OPERATORS: BUILDING AN

ICT PORTFOLIO FOR SMES

TERRY VAN STADEN



KEY QUESTIONS ANSWERED IN THIS REPORT

WHO SHOULD READ THIS REPORT

2

This report analyses the opportunity for operators to sell ICT1

services alongside traditional connectivity services to small and

medium-sized enterprises (SMEs) as a single ICT bundle.

This report provides recommendations for operators on how to

build an ICT portfolio for SMEs and the best ways in which to fully

capitalise on this opportunity.

Bundling ICT and connectivity services will have three primary

benefits for operators. It will:

▪ boost enterprise portfolios and revenue

▪ reduce churn by introducing stickier products

▪ provide a strong differentiator in saturated markets.

This report is based on:

▪ interviews with operators

▪ Analysys Mason’s internal research including global enterprise

forecasts and our global survey of 1600 enterprises.2

About this report

▪ What are the challenges hindering operators’ potential in the ICT

market?

▪ What are the best methods for operators to use to overcome these

challenges and penetrate the ICT market?

▪ What are the best methods for selling these services alongside

traditional connectivity?

▪ What reforms to sales and support structures are needed for this

transition to be effective?

▪ Strategy teams and individuals from operators’ enterprise or SME

divisions that are interested in exploring the opportunities in the SME

and ICT market.

1 We define ICT services as those that go beyond traditional connectivity services, including security,

cloud, unified communications, SaaS, PaaS, mobility and desktop management.

2 For further information, please see Analysys Mason’s Telecoms services for small and medium-

sized enterprises: worldwide forecast 2017-2022.

http://www.analysysmason.com/Research/Content/Reports/SMEs-forecast2017-worldwide-RDMZ0/#23%20October%202017



Figure 1: Levels of interest for operators in ICT services

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Enterprise revenue is declining for most large telecoms

operators in high-income countries but interest in ICT services is

rising as a new and growing source of revenue. Operators are

well positioned to bundle ICT services with traditional

connectivity services, but they will need to gain the necessary

capabilities and alter their sales and support structures to fully

capitalise on this opportunity.

This report provides recommendations for operators on how to

bundle ICT and connectivity services for SMEs. Few operators

have been successful in doing this and ICT services only account

for 5% of operators’ revenue from SMEs worldwide.

This report summarises the potential for bundling, and the major

challenges currently hindering operators’ potential in ICT services.

To enhance their position in the ICT market, we recommend that

operators:

▪ carefully select which ICT opportunities to pursue and ensure

that they align with the operators’ core strategy

▪ gain the necessary capabilities through acquisitions and

partnerships

▪ reform sales and support structures through comprehensive

training schemes and the acquisition of experienced ICT sales

and support personnel.

Executive summary

Interest level for operators from high to low



Figure 2: Breakdown of operators’ revenue from SMEs in terms of the share of the total

revenue, 2017, and CAGR, 2017-2022, Western Europe

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Declining revenue from traditional connectivity services is

placing enterprise revenue under threat for most operators in

high-income countries. Operators have the potential to offset

this downturn by advancing their ICT portfolios, but they often

lack the capabilities to be major ICT providers.

The diminishing returns from legacy services mean that there is a

greater importance for operators to diversify their ICT portfolios

and benefit from new and growing sources of revenue.

Operators have struggled to gain ground in ICT services: traditional

voice and connectivity services still account for over 90% of

operators’ revenue from SMEs in Western Europe (Figure 2).

Indeed, ICT services, such as security and cloud, currently

represent only a small portion of operators’ revenue from SMEs

(6% in Western Europe). However, with a CAGR of 12%, such

services are growing rapidly and will rise in importance and

potential for operators.

These potential advancements are not without their challenges.

Operators often lack the skills, experience and capabilities to be

major ICT providers. Sales teams, in particular, do not have the

incentives or the knowledge to sell ICT services.

The market for ICT services is also relatively mature in most high-

income countries, leaving little room for operators to enter the

market organically.

ICT services give operators the opportunity to offset declining legacy

revenue with new and growing forms of revenue, but there are challenges



Figure 3: The benefits of bundling ICT and connectivity services for operators

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Operators should carefully select which ICT services to pursue

in the SME segment, create an ecosystem of partnerships and

acquisitions to gain the necessary capabilities to be ICT

providers, and address the challenges in sales and support to

effectively penetrate the ICT market.

This report is separated into three sections, analysing each of the

fundamental considerations for operators in ICT services.

The first section provides a market analysis, identifying the key

services that should be considered by operators. However,

operators will need to build from a base of solid connectivity

services to succeed in the ICT market – SMEs who are dissatisfied

with their basic connectivity services will be unlikely to purchase

additional services from their operator.

Operators will need to use partnerships and acquisitions to gain

the appropriate ICT capabilities. This has been demonstrated by

the large number of operators who made ICT-related acquisitions

from 2015–2017 in order to advance their enterprise portfolios

(Figure 11). Partnering can be an effective means of obtaining the

right products, and acquisitions can supply operators with

experienced ICT sales and support staff and processes.

Selling and supporting ICT services may be the biggest challenges

facing operators. Operators should follow a simple, structured

approach to bundling ICT and connectivity services in order to

benefit SMEs and sales staff.

Operators will need to carefully select opportunities, partners and

acquisitions, and address the challenges in sales and support

PERSONALISED

AND EFFICIENT

INCREMENTAL

REVENUE

CHURN

REDUCTION

DIFFERENTIATION

BENEFITS OF

BUNDLING ICT

SERVICES

Source: Analysys Mason


© Analysys Mason Limited 2018 8

Recommendations

1Operators should select ICT opportunities that are closely aligned with their core connectivity services.

Operators should consider ICT services that are within the scope of their overall strategy and carefully select which

opportunities to pursue. Operators should focus on simple ICT products that can easily align with their core

services and address the bulk of the SME market. However, operators will need to build from a base of solid

connectivity services to succeed in the ICT market – SMEs who are dissatisfied with their basic connectivity

services will be unlikely to purchase additional services from their operator.

2Operators should gain the necessary ICT capabilities through acquisitions and partnerships.

ICT markets are already relatively mature and many providers have a strong position. Rather than try to compete

directly with existing ICT providers, operators should seek acquisitions and partnerships. Partnering with ICT

providers can help operators to obtain the products and reach to sell ICT services, and acquisitions can supply

operators with specialised technology and sales and support staff. Ultimately, operators should work towards an

ecosystem of acquisitions and partnerships to create an integrated and differentiable ICT portfolio.

3Operators should address the difficulties in sales and support and tailor their strategies to each segment.

Selling and supporting ICT services is likely to be operators’ greatest challenge in the ICT market. Operators should

tailor their sales strategies and services to each SME segment, with differing complexity and support in line with

SME size and requirements. Exploring sales strategies beyond simple bolt-on methods, such as tight bundling and

vertical strategies, can help operators boost the sales of ICT services. Acquisitions and partnerships will be

essential to effectively sell and support ICT services.



CONTENTSCONTENTS

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EXECUTIVE SUMMARY

REPORT OVERVIEW

PRODUCT SELECTION

ACQUISITIONS AND PARTNERSHIPS

SALES AND SUPPORT STRATEGIES

APPENDIX: OPERATOR CASE STUDIES

ABOUT THE AUTHOR AND ANALYSYS MASON



About the author

Terry van Staden (Research Analyst) is a member of Analysys Mason’s Enterprise and IoT research practice and is mainly focusing on enterprise

research reports and associated commentaries. He is conducting research into telecoms operators’ enterprise revenue in addition to a cost

analysis of their various enterprise services. Prior to joining Analysys Mason, Terry studied his masters in economics under full scholarship in

South Africa where his research papers won, or were nominated for, several national awards. He is a member of the Golden Key International

Honour Society and the recipient of the Gold Duke of Edinburgh's Award.



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PUBLISHED BY ANALYSYS MASON LIMITED IN MARCH 2018

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RESEARCH STRATEGY REPORT SME BUNDLING STRATEGIES … · 2020. 3. 30. · SME bundling strategies...

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